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I find your lack of faith..... disturbing.

Hah!

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The underpinning of capitalism is a free market, ie the ability of the market to determine the value of an item through supply and demand.

I'll readily admit I glossed over points in my paragraph-long explanation of the origins of currency, and, while I agree with what you say in regards to capitalism vs. socialism, I think you're avoiding my point. Just add in the phrase "an equivalent amount of" at appropriate points in my post. I think that socialism is well outside the scope of this argument. We're talking nearly pure capitalism in regards to the stock market, and the influence that government has on it looks to be insignificant in regards to my basic question.

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You question the value of holding a piece of paper issued by a company, but as pointed out previously, that is little different to holding a piece of paper issued by the Government.

That's very true, but the collapse of the government is a much bigger deal than the collapse of a company. I was reflecting on my own post and some of the issues involved in the Gold vs. Silver battle as suggested by Dan last night and was thinking about that exact fact, actually. As far as I can see, stocks are basically currency printed by companies instead of the government. And I guess, on some level, I question the right of those companies to issue currency. On a lower level, I question the right of the government to print currency. (Maybe I'm less of a socialist than I thought and more of an anarcho-syndicalist.)

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When that happens they'll stop investing in themselves and start on the dividend treadmill.

I'm going to take this as my "dividends are the final return" answer. I guess my issue with that is that it seems like investing in stocks for their dividends is very much a small part of stock investing. Maybe I'm wrong. On the other hand, Microsoft would seem to be a well established company in a well established sector with billions in the bank, and they do pay dividends. At a rate of 1.33%. If my calculations are correct, that means it would take 53 years to pay off. Of course, I'm intentionally ignoring the case where someone bought it in 1986 for $21. So it seems that the answer really, ultimately, is that investors bet that dividends will pay off more than they invested in the company.

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As an aside, if you think about it another way, what would it say about the economy and technological progress if 100% of companies paid dividends? How big could companies get if they didn't invest in themselves?

If I give you $100 and you pay me back $3 every year, you still have a large portion of that money for a long time.

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The stock value multiplied by the number of shares outstanding _is_ the value of the company as set by the free market.

No, that is the potential value. My company was once trading at something like $20 a share. When it got bought out, it was at like $0.15 a share. According to your definition, both of those are the value of the company. Unless we're going to get into quantum finances, both of those can't be true.

At the same time, if you look at the stock market as betting on how much a company will eventually pay in dividends, other than semantic quibbling (which, don't get me wrong, I'm more than happy to do), this is the obvious explanation for how it all works.

The problem with that is that no one (here, at least) will commit to dividends being the ultimate reward.
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Bitt Faulk